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Five Strategies to Help Address the Challenges of a Hostile Takeover

Overcoming the challenges of acquiring and integrating an organization after a bitter proxy fight and hostile takeover can be a test of a company’s leadership abilities. It also will likely test the skills of management and integration teams.

Many of these challenges directly affect employees. “Acquirers should be prepared to defuse tension as they ask the acquired organization’s leadership team and employees to commit to their company’s terms and conditions, values and mission,” says Kevin Knowles, a principal and national operations leader for Deloitte Consulting LLP’s U.S. Human Capital M&A practice. “To further complicate matters, integration teams often have limited information about the target organization, its leadership and its employees, which can hinder integration efforts.”

In spite of the challenges, five people management strategies can help executive leadership increase the probability of retaining top talent, delivering growth and capturing synergies in a hostile takeover scenario.

Strategy #1: Use Time Wisely

Engaging in a hostile takeover means leadership will have limited access to information about finances, employees, organization structure and company operations during due diligence. As a result, extensive due diligence and development of a synergy capture strategy and plan cannot occur until post-close. Use the time prior to transaction close to develop an integration strategy and project management structure. This will help enable a timely ramp-up once the transaction closes, accelerating synergy capture.

Develop integration scenarios—Expedite the integration process by crafting a primary integration scenario, as well as various alternatives. Build and launch the integration team before the transaction is signed.

Prepare for post-close due diligence—Create a checklist of the data and practices required for assessing and controlling the business on Day One. In one-sided planning teams, prepare people to take ownership and accountability for the many aspects of the acquired business.

Understand applicable regulations and labor laws—If the target operates in countries where the acquiring organization does not have operations, it is wise to spend time prior to close researching local labor laws to expedite Works Council approval or other labor processes.

Hot topic scenario planning—Work with the leadership team to develop contingency plans in case the integration does not go as planned. How would the leadership team handle a mass exodus of the acquired employees? What happens if the approval is significantly delayed?

Strategy #2: Stabilize the Organization

Employees acquired in a hostile takeover will usually have intensified fears about job security, a changing work environment and the future of the company. The top priority should be to address employee concerns and reduce uncertainty in order to maintain business as usual. To help accomplish this, consider announcing the top leadership team and actively engaging employees as part of the new organization as soon as possible.

Select leaders—Given the lack of communication with target leadership prior to close, leadership selection should be made a priority immediately at close.

Engage employees—Take steps to identify top talent early and create strategies to keep people engaged, transfer unique knowledge and keep a laser focus on key priorities. “After the close of the transaction, it’s a good idea to review the most recent management performance talent assessments to identify managers with influence across the organization,” says Mr. Knowles. “Implement change management and communications tactics to leverage these managers to help set the tone for the integration and communicate informally with employees,” he adds.

Consider cultural differences—Cultural differences may impede employee engagement following a hostile takeover. One way to identify potential areas of cultural differences before the close is to scour industry blogs, recruitment boards, employee web pages and other public domain sources. Understanding cultural similarities and differences across the two organizations can help in designing and launching initiatives that will resonate with employees.

Strategy #3: Align Leadership

Proxy fights can be long and drawn out, giving the target company’s leaders time to voice negative opinions regarding the takeover and the acquirer’s organization. Once the transaction is closed, it is important to rally them around the organization’s mission, vision and strategy.

To understand the interests and concerns of the target organization, consider holding one-on-one interviews with its leaders across business units as soon as possible after close. Use the information gathered to develop materials for leadership alignment sessions and communication materials. Additionally, a leadership summit held immediately after the close can provide an opportunity to influence leaders from both organizations.

Encourage leaders to be vocal about the positive aspects of the transaction while maintaining a sense of realism, since some employees may view this as an artificial effort. However, if a leader vocalizes negativity and undermines the ability to engage the broader organization, consider removing that leader from the organization.

Strategy #4: Communicate to Influence

Managing external and internal communications is critical to success during a hostile takeover. Negative media coverage during the proxy battle may have negatively influenced customers, partners, community and employees. Post-close, it is imperative to establish transparent, timely and consistent communications with stakeholders to reverse any negative perceptions.

Consider timing—Timing of communications is especially important following a hostile takeover. It’s important to manage tightly the information disseminated to the media so that employees and customers do not first hear about it in the news.

Communicate often and in a variety of ways—Leadership should communicate critical information to employees on a timely basis, using multiple communications vehicles, leveraging existing media (email, portal, leaders, conference calls) and cascading through managers during team meetings when possible.

Keep in mind current employees—Following a hostile takeover, it is easy to overlook the needs and concerns of current employees. Current employees can be highly vocal following an acquisition and can influence perceptions of acquired employees. Factor them into communications planning and get them involved in the development and delivery of targeted initiatives and messages when possible.

Strategy #5: Recognize that Some Things Cannot Be Controlled

A hostile takeover will present leadership with unforeseen challenges, many of which can be prepared for during scenario planning exercises. Yet even with detailed scenario planning, many things will be out of leadership’s control.

For example, timing of the court’s decision and shareholder voting process may be delayed, making it difficult to estimate when the transaction will close. Create an integration plan that is well thought out, yet flexible, and allows for multiple activities to occur simultaneously. Empower the integration team to make decisions in order to address any unexpected delay, acceleration or challenge.

Be prepared for challenges both before and after close. Prior to close, there may be rumors about leadership and employee attrition leaked to competitors. There must be a solid retention strategy and program in place beginning Day One to help retain critical talent. After close, leadership may uncover surprises related to missing or inaccurate employee data. Regardless of the challenges in the back office, it is critical that leadership be prepared to begin engaging new employees on Day One.

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